Technical know-how and royalty payments excluded from imported raw materials valuation where no sale condition linked the charges.

Technical know-how fee and royalty paid under the collaboration agreement were held not to form part of the assessable value of the imported raw materials. The agreement was concerned with granting technical know-how and a licence to manufacture finished goods, while the raw materials could be sourced from the collaborator or elsewhere subject only to technical specifications. Because there was no condition linking the sale price of the imported materials to payment of know-how or royalty, and no evidence that the price was influenced by the parties' relationship, those payments were treated as consideration for the manufacturing licence alone and excluded from customs valuation.

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Issues: Whether the lump sum technical know-how fee and royalty paid under the collaboration agreement were includible in the assessable value of the imported raw materials.

Analysis: The agreement was found to relate to the grant of technical know-how and licence to manufacture finished goods, while the raw materials could be purchased from the collaborator or other sources, subject only to technical specifications. There was no condition linking sale of the imported raw materials to payment of technical know-how or royalty, and the price of the raw materials was not shown to be influenced by the relationship between the parties. The lump sum payment and royalty were both consideration for the licence to manufacture finished goods, so they could not be treated differently for valuation purposes.

Conclusion: The lump sum technical know-how fee and royalty were not includible in the assessable value of the imported goods, and the appeal was allowed.

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